The AI buildout depends on more than chips and power. It also needs a supply chain that can make air handling units, chillers and coils fast enough to keep new halls cool. Modine Manufacturing, the Racine, Wis., thermal management company, gave one of the clearest views yet of that supply chain on Nov. 3, 2026, when it reported results for the second quarter of fiscal 2027. Demand is running well ahead of last year. Margins are not keeping pace.
In its results release, filed with the Securities and Exchange Commission as an exhibit to a Form 8-K, Modine said its Data Centers segment had sales of $439.7 million in the quarter. That compares with $225.0 million a year earlier, an increase of 95%. The company said hyperscale customers in North America drove the growth.
Order intake was the bigger headline. On the earnings call, according to a transcript published by The Motley Fool, Chief Executive Officer Neil Brinker said data center orders exceeded $1 billion in a single quarter for the first time in the company's history. The company's earnings presentation called it the fourth consecutive quarter of record orders, and Brinker said on the call that backlog reached another historic high.
A Single Hyperscale Award Worth More Than $400 Million
The largest individual item in the quarter was a program award from what the company calls a strategic hyperscale customer. Brinker said on the call that the program covers more than $400 million of custom air handling units, to be supplied through calendar year 2027. The earnings presentation listed it as a $400 million program award. Modine did not name the customer in the documents reviewed for this article.
Air handling units move and condition air inside a data hall, and custom units are built to a specific operator's design. An award of this size, with deliveries scheduled across a defined window, ties a share of Modine's manufacturing capacity to one buyer's construction schedule for more than a year.
Where the Capacity Is Coming From
Modine described several capacity moves meant to turn that backlog into shipments:
- Calgary. The earnings presentation said Modine launched production at a third dedicated data center facility in Calgary to support air handling units. Brinker described it on the call as the company's third dedicated data center facility.
- Franklin, Wis. Brinker said the company is increasing throughput at its Franklin facility.
- Chiller lines. The company said it has 13 active chiller lines and is on track for 20 by the end of the fiscal year, according to both the presentation and the call.
- Suppliers. The presentation said Modine has entered into long-term agreements with key suppliers. The Motley Fool's summary of the call names fans and evaporators as critical components covered. In the results release, Brinker said the company has entered into long-term agreements with multiple strategic suppliers.
- Internal sourcing. The presentation said Modine's Commercial HVAC business has qualified as a new supplier of evaporators to the Data Centers segment and is evaluating and quoting additional opportunities as a tier-two coil supplier. It also reported continued growth in coil sales to data center customers.
Taken together, the list shows where a cooling manufacturer runs into limits when it scales: assembly floor space, chiller production lines, and outside parts such as fans and evaporators. Modine's answer combines new plants, more lines, contracted supply and more parts made in-house.
Revenue Up, Margin Down
The growth came at a cost. The company reported a Data Centers gross margin of 19.7%, down 470 basis points from a year earlier. It attributed the decline to higher material, component and tariff costs.
The segment was still profitable. According to the company, Data Centers adjusted EBITDA was $67.6 million in the quarter, up 66%, and operating income was $61.2 million, up 70%. In other words, segment profit dollars grew, though more slowly than sales, as each dollar of sales kept less margin.
That combination is worth watching across the data center supply chain. Operators want fast delivery of custom equipment, and the parts and tariff costs behind that equipment are rising. In Modine's results, both trends showed up in the same quarter.
The Rest of the Company
Modine reported total net sales of $994.4 million for the quarter, up 35%. Its Commercial HVAC segment had sales of $285.5 million, up 23%, according to the results release and the version of the company's announcement distributed on PR Newswire.
The company has also become smaller and more focused on climate products. According to the earnings presentation, it completed the spin-off of its Performance Technologies business and merger with Gentherm on Oct. 1. The release put net debt at $573.7 million as of Sept. 30, and the Motley Fool's summary of the call says it was subsequently reduced by a $200 million payment from Gentherm received on Oct. 1.
Modine raised its full-year revenue outlook for the remaining business. The company guided to fiscal 2027 revenue of $3.1 billion to $3.2 billion for that core business, according to the call transcript.
Why It Matters Beyond Modine
For utilities, local officials and residents near proposed campuses, a cooling supplier's results are an indirect indicator of how much construction is moving from announcement to equipment order. An air handler or chiller is ordered when a project is far enough along to need it. A $1 billion order quarter and a hyperscale award running through 2027, as Modine described them, are consistent with hyperscale projects in North America being equipped, not just planned.
For the industry, the margin figure carries its own message. The company's own account is that material, component and tariff costs lowered its Data Centers gross margin, even as it adds plants and production lines. Customers depending on custom cooling equipment are buying from a supply chain that is expanding under cost pressure.
What Happens Next
Modine has stated three sourced milestones. It expects to go from 13 active chiller lines to 20 by the end of fiscal 2027. It launched production at the Calgary facility, which supports air handling units. Deliveries under the hyperscale program, which covers more than $400 million of custom air handling units, are scheduled to continue through calendar year 2027. The company has also set a fiscal 2027 revenue outlook of $3.1 billion to $3.2 billion for the core business.
